Net revenue increased 15.4% to $7.3 million from $6.3 million during the three months ended September 30, 2018 (“Q1 FY 2018”).
Gross profit rose 18.2% to $5.5 million from $4.7 million in Q1 FY 2018.
Operating income grew 100.6% to $199,000 from $99,000 in Q1 FY 2018.
Net income expanded 90.7% to $154,000, or $0.02 per diluted share, from $81,000, or $0.01 per diluted share, in Q1 FY 2018.
Cash flow from operating activities totaled $303,000, compared to $328,000 in Q1 FY 2018.
Field sales employees grew to 49 at the end of Q1 FY 2019 from 41 at the end of Q1 FY 2018.

Kathleen Skarvan, President and Chief Executive Officer of Electromed, commented, “We achieved strong top- and bottom-line growth in the first quarter of fiscal 2019, driven by a 13.8% year-over-year increase in home care revenue. Both referrals and approvals rose year-over-year, reflecting our expanded sales force, ongoing excellence in our reimbursement operations and continuing efforts to advance physician awareness and education surrounding the benefits of high frequency chest wall oscillation therapy (“HFCWO”) with our SmartVest® device. We also are pleased to report that sales in our institutional segment this quarter rose 42.0% year-over-year, driven primarily by our strategic focus on integrated delivery networks (IDNs).”

Ms. Skarvan continued, “Looking ahead, we believe Electromed can achieve double-digit revenue growth with our strategies of providing superior device features and benefits along with world-class service, leading in bronchiectasis clinical studies and improving education and awareness of bronchiectasis prevalence and the need for the SmartVest Airway Clearance System to effectively treat these patients. We believe earnings growth will improve over the next few years as we focus on sales force productivity improvements and tighter SG&A cost control. We continue to emphasize greater frequency of visits to targeted clinics and hospital systems that more actively prescribe HFCWO therapy, versus greenfield locations with limited sales activity and generating higher quality referrals for higher referral to approval conversion rates. We remain as excited as ever about the large and growing bronchiectasis market and dedicated to improving quality-of-life and outcomes for patients with compromised pulmonary function.”

Q1 FY 2019 Review

Net revenue increased 15.4% to $7.3 million in Q1 FY 2019 from $6.3 million in Q1 FY 2018, primarily driven by higher home care revenue. Home care revenue rose 13.8% to $6.7 million in Q1 FY 2019 from $5.9 million in Q1 FY 2018, primarily due to growth in referrals and approvals driven by a larger field sales staff and continued improvements in the Company’s reimbursement operations that led to a greater referral to approval percentage.

Gross profit increased 18.2% to $5.5 million, or 76.2% of net revenue, in Q1 FY 2019 from $4.7 million, or 74.4% of net revenue, in Q1 FY 2018. The increase in gross profit resulted primarily from an increase in home care revenue.

Operating expenses, which include selling, general and administrative (“SG&A”) as well as research and development (“R&D”) expenses, totaled $5.3 million, or 73.4% of revenue, in Q1 FY 2019 compared with $4.6 million, or 72.8% of revenue, in the same period of the prior year. SG&A expenses increased 16.7% to $5.3 million in Q1 FY 2019 from $4.5 million in Q1 FY 2018, primarily due to higher payroll and compensation-related expenses and increased travel, meals and entertainment expenses which were driven by the expansion of our sales force. R&D expenses totaled $68,000 in Q1 FY 2019 compared to $71,000 in Q1 FY 2018.

Operating income increased 100.6% to $199,000 in Q1 FY 2019 from $99,000 in Q1 FY 2018, primarily due to increased gross profit driven by higher revenue, which was partially offset by costs related to the expansion of our sales force.

Net income before income tax expense rose 123.7% to $212,000 in Q1 FY 2019 from $95,000 in Q1 FY 2018.

Net income increased 90.7% to $154,000, or $0.02 per diluted share, in Q1 FY 2019, from $81,000, or $0.01 per diluted share, in Q1 FY 2018. In Q1 FY 2019, income tax expense totaled $58,000, compared to $14,000 in the same period of the prior year.

Financial Condition

Electromed’s balance sheet at September 30, 2018 included cash of $7.7 million, long-term debt including current maturities of $1.1 million, working capital of $18.9 million, and shareholders’ equity of $23.0 million.

For those who cannot listen to the live broadcast, an online webcast replay will be available in the Investor Relations section of Electromed’s web site at: http://investors.smartvest.com/

About Electromed, Inc.

Electromed, Inc. manufactures, markets, and sells products that provide airway clearance therapy, including the SmartVest ® Airway Clearance System, to patients with compromised pulmonary function. The Company is headquartered in New Prague, Minnesota and was founded in 1992. Further information about Electromed can be found at www.smartvest.com.

Cautionary Statements

Certain statements in this release constitute forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995.
Forward-looking statements can generally be identified by words such as “believe,” “estimate,” “expect,” “may,” “plan” “potential,” “should,” “will,” and similar expressions, including the negative of these terms, but they are not the exclusive means of identifying such statements. Forward-looking statements cannot be guaranteed and actual results may vary materially due to the uncertainties and risks, known or unknown associated with such statements. Examples of risks and uncertainties for the Company include, but are not limited to: the competitive nature of our market; risks associated with expansion into international markets; changes to Medicare, Medicaid, or private insurance reimbursement policies; new drug or pharmaceutical discoveries; changes to health care laws; changes affecting the medical device industry; our need to maintain regulatory compliance and to gain future regulatory approvals and clearances; our ability to protect and expand our intellectual property portfolio; our ability to renew our line of credit or obtain additional credit as necessary; our ability to develop new sales channels for our product; and general economic and business conditions, as well as other factors described from time to time in our reports to the Securities and Exchange Commission (including the Company’s most recent Annual Report on Form 10-K, as amended from time to time, and subsequent reports on Form 10-Q and Form 8-K). Investors should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or potentially inaccurate assumptions investors should take into account when making investment decisions. Shareholders and other readers should not place undue reliance on “forward-looking statements,” as such statements speak only as of the date of this release.